The Financial Appropriation Bill (2021) was passed in the Senate with 23 votes and six abstentions yesterday.
As he wrapped up his presentation, Finance Minister Colm Imbert assured that the Budget will bring increased household income to over 250,000 families because of adjustments in personal income tax allowances.
“Government is giving up $750 million on an annual basis. A total of 250,000 tax-payers are going to benefit from this. It is a balancing act. We hope this will stimulate and generate income and we will get it back in the consumption side. And even if we don’t get it back, we are providing a social safety net to 250,000 families,” he said.
He noted that the multiplier effect of this move would be far more than $750 million.
Imbert also said that lovers of apples and grapes need not fear because these fruits will be available year-round.
Explaining the decision to have increased taxes on the fruits, Imbert said T&T spends $55 million annually on the importation of apples and grapes noting that previously unprocessed food was exempt from VAT.
“ We felt no need to allow these items to come into T&T without any VAT. The price for a kilo of grapes is $10.20. That is $4.65 per pound. When VAT is added we will increase grapes by 58 cents. That will not prevent grapes from coming into the market,” he said.
He noted that the price of a pound of apples will go up by 43 cents.
“ I don’t think imposing VAT on apples and grapes will stop people from importing. We will not go back to the time when we will see these items only at Christmas,” Imbert said.
He also defended the Government’s decision to peg the Budget on an oil price of US$45 and a gas price of $3 per MMBTU.
“I will like to confirm that these parameters were not plucked out of the sky but what we have done in the last six Budget exercises is that we utilize the projections from several important and recognized bodies that are in the business of forecasting oil prices and that will include the US energy administration, the IMF and World Bank and another research entity out of Europe. Based on all projections and our projections, we calculated that price,” Imbert said.
He noted that before 2017 and 2018, T&T’s oil and gas price regime was based on profits based model.
“Back in 2015, bpTT told us based on the then prevailing oil prices and investments they will not pay Petroleum Profits tax so we switched to the volume-based model and applied a royalty for oil of 12 and a half per cent across the board. That means no matter the oil price, we will have a 12.5 per cent across the board for oil and 12.5 per cent for gas. It means we will have guaranteed an income stream for T&T,” he explained.
Noting that some people wanted the Government to budget without a deficit, Imbert said T&T’s revenue dropped to $34 billion which represented a decline of $13 billion compared to last year.
“We are running a deficit. We decided not to do what some has suggested which is to spend the same amount we earn. This will crash the economy. We have no choice but to run a deficit. Major economies are doing the same. Advanced economies have suffered,” he added.
He noted that the digitalization of the economy was needed.
“ I already removed taxes on tablets, notebooks, laptops. We will complete the removal of taxes for mobile phones. Many are using these phones for dual purposes. We will remove taxes on software, computer accessories to motivate people to get involved in digitalization and move toward electronic commerce and services. We will incentivize businesses by providing tax allowances for businesses that create employment in technology,” Imbert added.
“To encourage people to be first-time home-owners we want to assist by increasing the stamp duty threshold from 1.5 million to 2 million. That will save $28,000 in stamp duties. It will benefit 1000 families,” he added.
Imbert also said penalties will be increased for predial larceny and illegal quarrying.
“We looked at the situation for the importation of cars. We have 1.1 million vehicles in the country. More than one for every driver. We are of the view that there are too many cars on the road. We import 25,000 vehicles annually and two-thirds of that are private vehicles; US$400 million per year is leaking out in the importation of cars when there is more than one car per registered driver in this country, so we increased taxes on the smaller cars to reduce imports,” Imbert explained.
Noting that tobacco continues to kill people and it costs the Ministry of Health $500, 000 per year to treat one lung cancer patient, Imbert said this was why taxes for this industry were increased.